Opinion: In defence of offshore jurisdictions post-Paradise Papers

By: Jack Inglis, Chief Executive, AIMA | 27 Nov 2017

The so-called Paradise Papers cast scrutiny once again on offshore jurisdictions, with suggestions of improper tax behaviour, notes Jack Inglis, chief executive of the Alternative Investment Management Association. The London-headquartered AIMA represents some 1,900 companies around the world involved in the alternative investments sector, which includes hedge funds, private equity funds, precious metals, collectibles, classic cars and basically, investments other than stocks, bonds and cash, and many of these companies have operations in such offshore jurisdictions as the Cayman Islands, Guernsey and Jersey, so the issues and implications raised by the Paradise Papers were of considerable relevance to the AIMA’s members.

Once again, the Paradise Papers saw a feeding frenzy on the part of a global media industry that, again, too often revealed a complete lack of understanding as to how the jurisdictions and companies named in the documents actually operate.

When the Queen’s name got dragged into it, some journalists actually did look to become better informed, and we were able to help them with our existing briefing note (here) of these fully transparent and tax-neutral fund domiciles.

As a result, we saw some more balanced reporting, as it became clear that most savers have, in some way or other (typically through their pensions), money invested that way.

So, move along, nothing to see here – investors are not avoiding tax, and these jurisdictions play an important role in helping channel savings into capital formation around the world.

However, this comes at a time when the European Council is preparing to blacklist up to a possible 53 countries as non-cooperative tax havens. The political climate is such that it is highly possible we find jurisdictions with established records of cooperation and compliance such as the Cayman Islands and Bermuda on the list.

We think this would be unfair and arbitrary.

It is hard to understand how most of the offshore jurisdictions do anything different from a tax and transparency perspective than a number of onshore ones. Most of them comply with all sorts of tax information exchange agreements (FATCA, CRS) with the EU and US.

Representations are being made at the highest levels to ensure these offshore jurisdictions are treated fairly, and not listed unnecessarily.